- Nigeria’s Oil Sector on Two Decades of Decline
Contrary to popular belief that the Nigerian oil sector has been aiding Nigeria’s growth over the years, available data shows otherwise.
In fact, Nigeria’s oil sector has been contracting for the past two decades, according to the Central Bank of Nigeria’s 2018 Statistical Bulletin.
A data compiled by the apex bank showed that between 1999 and 2018, the oil sector grew at an annual rate of -0.5 percent and between 2009 and 2018, the sector average -3.1 percent growth rate.
During the same period, oil production was 2.24 million barrels per day and at an average price of $51.55. Suggesting that it wasn’t the Niger-Delta issue or weak oil prices but poor growth strategy.
The oil sector entered second recession in three years in the third quarter of 2018 after the sector recorded negative growth of -3.95 percent in the second quarter of 2018 and -2.91 percent in the third quarter of the same year.
This was when oil price was averaging $60 a barrel, the reason lawmakers adjusted the 2019 budget to reflect the improvement in global oil prices.
According to Mr. Maju Eldad, a lecturer of Economics at the Federal University of Kashere, Gombe State, “Nigeria’s crude oil sector has now been in a recession for over a year which could be very catastrophic for the economy. Even though its contribution to GDP has been in decline for years, the Federal Government is still heavily reliant on oil export earnings to finance Nigeria’s budget.”
Since 1999, Nigeria has produced an estimated $801 billion worth of crude oil and earned at least half of the amount from oil tax royalties, yet growth in the sector remained weak and has failed to help prop other key sectors needed to actualize diversification agenda.
While Melo Kyari, the new GMD, NNPC, has said the corporation will ensure all local refineries are working by 2023, it is uncertain if the oil price will remain the same given current global situation and evolution of solar energy.
Therefore, Nigeria needs to start using oil revenue as a catalyst for economic diversification going forward and not a means to pay recurrent expenditure or rising national debt.